When Buying Your First Home, Don’t Forget to Budget For These 10 Costs

first time buyers costs of buying a home










Buying your first home can be scary and exciting all at the same time. It’s a huge life step! There’s nothing quite like being handed the keys to your first home and knowing that it’s yours.

Anyone who has purchased a home knows that while the process is long and tiring, it’s completely worth it in the end.

But for an unprepared first time home buyer, it can sometimes feel like costs and fees are popping up out of nowhere. This makes for a stressful home buying process, when it should be exciting!

To help you get through the unexpected home buying expenses, we put together a list of all the costs you might not have prepared for.

Ready to get started? Here are 10 expenses first time home buyers often overlook when buying a home.

Initial Down Payment

There are mixed reviews on what the “ideal” initial down payment should be. Some real estate experts suggest at least 5 percent of your home’s cost, while others suggest as much as 20 percent or more.

Ultimately, the amount you pay on your down payment is up to you and your mortgage lender. However, we suggest a down payment between 10 and 20 percent of your home’s cost.  

What many home buyers don’t realize is that when you make less than a 20 percent down payment on your home, you’ll probably get stuck paying for private mortgage insurance.

Private mortgage insurance, or PMI, protects the lender, not the buyer. It requires you to pay for the remaining percentage of your down payment if your payment is less than 20 percent. This can be a one-time payment, or broken up into monthly payments.

We know making that initial down payment can be a challenge, especially for younger home buyers. See our 6 Tips For Conquering The Down Payment.

Closing Costs

This is an unplanned expense that normally hits the hardest. On top of your down payment, home buyers (and sellers) are typically required to pay closing costs.

Closing costs can range anywhere from two to four percent of your home’s price. While that may not sound like a lot, it can add up especially if you weren’t expecting them! For a $200,000 home, that cost could be $4,000 to $10,000.

Don’t be scared, though! There’s a reason you’re paying those closing costs. Closing costs will cover:

  • Loan origination fee
  • Home and pest inspection fees
  • Appraisal
  • Prepaid property taxes and mortgage insurance
  • Title insurance
  • Recording fees
  • Underwriting fees

Not to mention, anything is negotiable! Some home buyers don’t have to pay closing costs at all, so always talk to your Realtor® about negotiating these costs with the seller.

Maintenance Fees

Unlike renting, you are now fully responsible for your home and its upkeep. Some experts say you should estimate one to two percent of your home’s price in maintenance each year.

This could be yard care, pressure washing, gutter cleaning and whatever else is necessary to keep your home’s appearance, structure, health, and longevity up.

However, if you’re buying an older home rather than new construction, you can definitely count on more maintenance fees. The overall upkeep of your new home depends heavily on the home itself, and its location.

When you first move in, you’ll undoubtedly have some maintenance and repairs to take care of. Make sure to set aside some money in your budget in preparation for the cost of these fixes.

Moving Day Costs

Just moving out of your current living space has plenty of costs on its own! You may consider hiring a moving company or renting a moving truck. These prices can add up quickly, especially when you consider the boxes, tape, bubble wrap, moving pads and more, needed.

Look into places where you can get moving boxes for free. Hey, one less cost!

New Appliances

While you might get lucky and move into a new home with new appliances, it’s not always possible. In most cases, you’ll have to purchase larger appliances like a refrigerator, washer and dryer, or stove.

Plus, you’re going to need furniture to fill up your new home! Things like a couch, dining table and bedroom set can get pricey.

If you enjoy DIY projects, you can always shop at your local Habitat for Humanity Re-Store. You can find lots of items for a great price (and a great cause)—all they need is some TLC!

Homeowners Insurance

Buying a home is one of the biggest investments you’ll ever make! Having homeowners insurance is crucial in protecting your investment.

Homeowners insurance will protect your home in the event of a fire, burglary, or any other potentially damaging event. Thankfully, Raleigh isn’t located in an area that necessarily requires earthquake or flooding insurance. But, you can always add those as extra protection for your home if you wish.

To give you an idea, the average monthly cost of homeowners insurance in North Carolina is $88, while the average annual cost is $1,056.

Property Taxes

Property taxes are an annual fee and are non-negotiable. However, this is one fees you’ll know about up front!

These taxes are usually around one to two percent of the home’s listing value, and you can either pay them in one annual fee or break it up into monthly payments added into your mortgage.

Earnest Money

This is an amount paid by the buyer to the seller upon making an official offer. Earnest money shows the seller that you have good faith, and intend to follow through with purchasing the home.

The amount of the deposit is typically around five percent of the home’s price, but this number can vary. Always consult with your Realtor® first to see what they think the seller might be looking for.

The good thing about earnest money is that if your offer is accepted, this amount can then be applied to your down payment or closing costs. If your offer is rejected, you get the money back.

Utility Charges

To start or continue utility services like power, cable, and water, you’ll have to pay some type of installation fee. While this fee is usually small and added onto your first month’s bill, it is something to prepare for.

While it may not seem like a hefty expense in regards to the others–smaller fees like this are often easily forgotten!

Odds and Ends Expenses

Unfortunately, there’s no “tell-all” list when it comes to first time home buying expenses. Some things can pop up out of nowhere, and some expenses might cost more than you budgeted for. Always make sure you have a little wiggle room in your “unexpected expenses” budget for the extremely unexpected.

Plus, things like paint, touch-ups, and buying yard and home maintenance tools can get expensive. Some things you may not need right away, so save your money for the things that you do! You can always add more along the way.

Having a Realtor® who understands your wants and needs is invaluable! The right Realtor® can make your first home buying process seem simple, rather than extremely complicated.

Buying your first home is a huge step, and we want to help you pick and buy the perfect home for you! If you’re ready to purchase your first home, we’re ready to help. Give us a call today or schedule an appointment and get one step closer to your dream home.